EX-10.74.01
MASTER LEASE
AGREEMENT
Between
BV HOLDING-LTC,
INC.,
as
Lessor
and
EMERITUS
CORPORATION,
as
Lessee
Dated: November 18, 2008
Laurel Springs Assisted Living
Facility, 8100 Westwold Drive, Bakersfield, California
Summerfield House, 1111 Ulatis
Drive, Vacaville, California
MASTER LEASE
AGREEMENT
THIS MASTER LEASE AGREEMENT (this “
Lease ”) is made effective as of November 18, 2008, by
and between BV Holding-LTC, Inc., a Delaware corporation (“
Lessor ”), and Emeritus Corporation, a Washington
corporation (“ Lessee ”), subject to the terms,
conditions and contingencies set forth below.
RECITALS
WHEREAS, Lessor owns or leases certain real
property and improvements (as more particularly defined below,
“ Properties ”), and desires to lease them to
Lessee pursuant to the terms and conditions of this Lease;
and
WHEREAS, it is the parties’ intention to
set forth their respective covenants and obligations in a single
agreement, not merely as a matter of convenience, but because the
leasing of both Properties as an inseparable unit is a special and
essential inducement to Lessor to enter into this transaction, and
but for the leasing of both Properties together as an inseparable
whole, Lessor would not have entered into this Lease;
and
WHEREAS, the parties agree and acknowledge that
the amount set forth as Minimum Rent (defined below) is calculated
on the basis of leasing both Properties together as a single,
inseparable group and is non-allocable among the two Properties,
and that it would be impossible to allocate to either Facility a
divisible portion of the Minimum Rent; and
WHEREAS, the parties agree and acknowledge and
are forever estopped from asserting to the contrary that if,
notwithstanding the provisions of these Recitals, this Lease were
to be determined or found to be in any proceeding, action or
arbitration under state or federal bankruptcy, insolvency,
debtor-relief or other applicable laws to constitute multiple
leases demising multiple properties, such multiple leases could
not, by the debtor, trustee, or any other party, be selectively or
individually assumed, rejected or assigned; and
WHEREAS, it is the parties’ intention and
understanding that nothing in this Lease, including any rights of
Lessor to inspect the Leased Property (defined below) or gain
access to any of Lessee’s information, shall constitute or be
deemed to constitute a duty on the part of Lessor to provide for
the safety and well being of any resident of the Leased Property,
which shall be the sole and exclusive responsibility of
Lessee.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable
consideration, the receipt, sufficiency and mutuality of which are
hereby acknowledged, it is agreed as follows:
Leased
Property . Upon
and subject to the terms and conditions hereinafter set forth,
Lessor leases to Lessee, and Lessee rents or hires from Lessor, all
of Lessor’s right, title and interest in the following (the
“ Leased Property ”):
|
|
The real
property particularly described in Exhibit
“A” (the “ Land
”);
|
|
|
The buildings,
structures, Fixtures (as hereinafter defined) and other
improvements of every kind including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and
lines (on-site and offsite), parking areas and roadways appurtenant
to such buildings and structures presently situated upon the Land,
including without limitation the Facilities (as defined below)
(collectively, the “ Leased Improvements
”);
|
|
|
The easements,
rights and appurtenances relating to the Land and the Leased
Improvements;
|
|
|
The permanently
affixed equipment, machinery, fixtures, and other items of real
and/or personal property, including all components thereof, now and
hereafter located in, on or used in connection with, or permanently
affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air
cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to
the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of
Lessee's Personal Property as defined in Article II
below (collectively the “ Fixtures ”);
and
|
|
|
All furniture,
furnishings, equipment, trade fixtures or other
personal tangible and intangible property including all components
thereof, owned by Lessor and now and hereafter located in, on or
used in connection with the Leased Improvements, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of
Lessee's Personal Property as defined in Article II
below.
|
|
|
Except with
respect to the representations, warranties and covenants of Lessor
set forth herein, the Leased Property is demised subject to all
covenants, conditions, restrictions, easements and all other
matters affecting title, whether or not of record, the conditions
and limitations expressly set forth herein, and any and all matters
created by or known to Lessee.
|
Term . The initial term of the Lease (the
“ Initial Term ”) shall be a period of ten (10)
years, commencing on the date (the “ Commencement Date
”) upon which Lessee is able to secure operating licenses in
its own name for both of the Facilities. If the
foregoing condition (the “Licensure Condition”) has not
been satisfied by December 1, 2008 or in the event
that Lessor
fails to secure the approval of its Lender on or before November
30, 2008 (the “ Lessor’s Lender Condition
”) or Lessee fails to secure the approval of its Board of
Directors on or before November 13, 2008 (the “
Lessee’s Board Condition ” and together with the
Licensure Condition and the Lessor’s Lender Condition, the
“ Conditions Precedent ”), this Lease shall
terminate and be of no further force or effect and the parties
hereto shall have no further obligations to the other under this
Lease. The Initial Term, plus all validly exercised
options to extend, if any, shall be referred to herein as the
“ Term.”
2.
Definitions . For all purposes of this Lease, except
as otherwise expressly provided, (i) the terms defined in this
Article II have the meanings assigned to them in this
Article II and include the plural as well as the
singular, (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles at the time applicable, and (iii)
the words “herein”, “hereof” and
“hereunder” and other words of similar import refer to
this Lease as a whole and not to any particular Article, Section or
other subdivision:
Additional Charges . As defined in Article
III .
Affiliate . When used with respect to any
corporation, the term “Affiliate” shall mean any person
which, directly or indirectly, controls or is controlled by or is
under common control with such corporation. For the purposes of
this definition, “control” (including the correlative
meanings of the terms “controlled by” and “under
common control with”), as used with respect to any person,
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such person, through the ownership of voting securities,
partnership interests or other equity interests. For the purposes
of this definition, “person” shall mean any natural
person, trust, partnership, corporation, joint venture or other
legal entity and shall exclude Daniel R. Baty and any related
entities.
Base Gross Revenues . The amount of Twenty Three Million
Eight Hundred Eighty Two Thousand Seven Hundred Eighteen and no/100
Dollars ($23,882,718.00).
Business Day.
Each Monday, Tuesday, Wednesday,
Thursday and Friday, which is not a day on which national banks in
the City of Los Angeles, California, are authorized, or obligated,
by law or executive order, to close.
Change of Control . As defined in Article
XVIII below.
Code . The Internal Revenue Code of 1986,
as amended.
Daniel R. Baty’s
Affiliates. When used with respect to Daniel R. Baty, the
term “Affiliate” shall mean any person which, directly
or indirectly, controls or is controlled by or is under common
control with Daniel Baty. For the purposes of this
definition, “control” (including the correlative
meanings of the terms “controlled by” and “under
common control with”), as used with respect to any person,
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such person, through the ownership of voting securities,
partnership interests or other equity interests. For the purposes
of
this
definition, “person” shall mean any natural person,
trust, partnership, corporation, joint venture or other legal
entity.
Default Interest.
As defined in Section
3.6 below.
Encumbrance. As defined in Article XXXIII
.
Event of Default.
As defined in Article
XVI .
Extended Term . As defined in Section
34.1 .
Facilities. Collectively, the two (2) assisted living
facilities located at the following common addresses: (i) 8100
Westwold Drive, Bakersfield, Kern County, California, and
(ii) 1111 Ulatis Drive, Vacaville, Solano County,
California.
Facility . As the context requires, any one of
the Facilities.
Fiscal Year. The twelve (12) month period from January 1
through December 31 of the same calendar year (as prorated for any
partial Fiscal Year during the Term).
Fixtures. As defined in Article 1 .
Gross Revenues. With respect to each Facility, all
revenues received or receivable from or by reason of the operation
of such Facility or any other use of the Leased Property of such
Facility, including all revenues received or receivable for the use
of or otherwise attributable to units, rooms, beds and other
facilities provided, meals served, services performed (including
ancillary services), space or facilities subleased or goods sold on
or from the Leased Property; provided, however, that Gross Revenues
shall not include:
(i) bad
debt in accordance with GAAP;
(ii) non-operating
revenues such as interest income or income from the sale of assets
not sold in the ordinary course of business; and
(iii) federal,
state or local excise taxes and any tax based upon or measured by
such revenues, where any such federal, state or local excise tax is
added to or made a part of the amount billed to the patient or
other recipient of such services or goods, whether included in the
billing or stated separately.
Gross Revenues shall not include the Gross
Revenues generated from the operations conducted on or from such
subleased, licensed or other used or occupied portion of the Leased
Property but shall include the rent received or receivable by
Lessee from or under an agreement with such subtenant or
licensee.
Impositions. Collectively, all taxes (including, without
limitation, all ad valorem, sales and use, single business, gross
receipts, transaction privilege, rent or similar taxes as the same
relate to or are imposed upon Lessee or its business conducted upon
the Leased Property), assessments (including, without limitation,
all assessments for public improvements or benefits,
whether or not
commenced or completed prior to the date hereof and whether or not
to be completed within the Term), ground rents, water, sewer or
other rents and charges, excises, tax levies, fees (including,
without limitation, license, permit, inspection, authorization and
similar fees), and all other governmental or public charges, in
each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased
Property or the business conducted thereon by Lessee (including all
interest and penalties thereon due to any failure in payment by
Lessee), and all increases in all the above from any cause
whatsoever, including reassessment, which at any time prior to,
during or in respect of the Term may be assessed or imposed on or
in respect of or be a lien upon (a) Lessor's interest in the Leased
Property, (b) the Leased Property or any part thereof, or any rent
therefrom or any estate, right, title or interest therein, or (c)
any occupancy, operation, use or possession of, or sales from, or
activity conducted on, or in connection with the Leased Property or
the leasing or use of the Leased Property or any part thereof by
Lessee. Provided, however, nothing contained in
this Lease shall be construed to require Lessee to pay (1) any tax
based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on Lessor, or (2) any transfer, or net
revenue tax of Lessor, or (3) any income or capital gain tax
imposed with respect to the sale, exchange or other disposition by
Lessor of any Leased Property or the proceeds thereof, or (4) any
single business, gross receipts, transaction, privilege, rent or
similar taxes as the same relate to or are imposed upon Lessor,
whether or not such taxes are related to the Leased
Property.
Incremental Gross Revenues.
The positive amount, if
any, by which the Gross Revenues for the Facilities, taken as a
whole, during the first three Lease Years exceeds the Base Gross
Revenues.
Insurance Requirements. All terms of any insurance policy
required by this Lease and all requirements of the issuer of any
such policy.
John Hancock Loan
Documents. As
defined in Section 36.24 below.
Land. As defined in Article I
.
Lease . As defined in the
Preamble.
Lease Rate . Lease Rate shall mean eight and
one-half percent (8.5%) in the first Lease Year, and will be
increased at the rate of three percent (3%) on each one-year
anniversary of the Commencement Date.
Lease Year. A twelve (12) month period
commencing each December 1 and ending each November 30.
Leased Improvements.
As defined in Article
I .
Leased Property.
As defined in Article
I .
Legal Requirements. All federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions
affecting either the Leased Property or the construction, use or
alteration thereof, whether now or hereafter
enacted and in
force, including any which may (i) require repairs, modifications
or alterations in or to the Leased Property, or (ii) in any way
affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any
instruments (whether or not of record) or otherwise known to
Lessee, at any time in force affecting the Leased
Property.
Lessee. As defined in the
Preamble.
Lessee's Personal Property.
All machinery,
equipment, furniture, furnishings, movable walls or partitions,
computers or trade fixtures or other personal property, and
consumable inventory/and supplies, used in Lessee's business on the
Leased Property, including without limitation, all items of
furniture, furnishings, equipment, supplies and inventory,
but expressly excluding (i) items
included within the definition of Fixtures; and (ii) personal
property described in Section 1.1(v) , above;
and (iii) all intangible personal property and all intellectual
property, including trademarks and other proprietary
marks.
Lessor. As defined in the Preamble.
Lessor’s Investment.
Lessor’s Investment for each
Leased Property shall mean:
(i) Twelve
Million Six Thousand and no/100 Dollars ($12,006,000.00) as it
relates to the Leased Property located in Bakersfield, plus any
Capital Allowance advanced for any Renovation Project at this
Leased Property and any other amount that, in accordance with any
other term or provision of this Lease, is to be added to
Lessor’s Investment.
(ii) Eleven
Million Six Hundred Fifty Three Thousand and no/100 Dollars
($11,653,000.00) as it relates to the Leased Property located in
Vacaville, plus any Capital Allowance advanced for any Renovation
Project at this Leased Property and any other amount that, in
accordance with any other term or provision of this Lease, is to be
added to Lessor’s Investment.
Minimum Rent . As defined in Section
3.1 .
Notice. A notice given pursuant to Article
XXX II
Occupancy Information. As defined in Section
25.1.3(b) .
Overdue Rate. On any date, a rate equal to the
Prime Rate (defined below), plus two percent (2%); provided,
however, that it is the intent of Lessor and Lessee that the
Overdue Rate (and all other interest rates provided for hereunder)
be in strict compliance with applicable usury laws of the State of
California, and that in the event the Overdue Rate (or other
interest rate provided for hereunder) shall be deemed to exceed
that permitted to be charged by the laws of the State of
California, any and all excess sums collected by Lessor shall be
credited against the Rent payable under this Lease or if there is
no Rent due, promptly refunded to Lessee.
Payment Date.
Any due date for the payment of the
installments of Minimum Rent.
Periodic Operating Statements.
As defined in
Section 25.1.3(a) .
Primary Intended Use.
As defined in Section
7.2.2 .
Prime Rate. On any date, a rate equal to the
annual rate on such date announced by Citibank, N.A. to be its
prime rate for 90-day unsecured loans to its corporate borrowers of
the highest credit standing or, if not available, such other rate
as may be published by The Wall Street Journal as the prime rate in
its listing of “Money Rates.”
Prior Operator. With respect to the Facility located in
Bakersfield, California shall mean Laurel Springs Assisted Living,
LLC and with respect to the Facility located in Vacaville,
California shall mean Summerfield House Assisted Living,
LLC.
Property Mortgage.
As defined in Section
13.1 .
Property Mortgagee.
As defined in Section
13.1 .
Rent. Any monetary obligations owing under this Lease,
including, without limitation, Minimum Rent and Additional
Charges.
Required Bed/Unit Count. As defined in Section
7.2.2 .
Security Deposit . As defined in Article
XXXV .
Security Interest . As defined in Section
3.7.
Term. As defined in Section 1.2
above.
Unsuitable for its Primary Intended
Use. A state
or condition of any Facility such that by reason of damage or
destruction, or a partial taking by Condemnation in the good faith
judgment of Lessor and Lessee, reasonably exercised, such Facility
cannot be operated on a commercially practicable basis for its
Primary Intended Use taking into account, among other relevant
factors, the number of usable beds affected by such damage or
destruction or partial Condemnation.
Unavoidable Delays.
Delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God,
governmental restrictions, enemy action, civil commotion, fire,
unavoidable casualty or other causes beyond the control of the
party responsible for performing an obligation hereunder, provided
that lack of funds shall not be deemed a cause beyond the control
of either party hereto.
The above does not include all the definitions
to be used in this Lease. Various definitions are
included in the Sections below.
Minimum
Rent . Lessee will pay to Lessor in lawful
money of the United States of America which shall be legal tender
for the payment of public and private debts by wire transfer only
to c/o Harris Trust and Savings Bank, at ABA 071000288, Account
Number 317-4554, OBI – LTC Properties, Inc., or at such
other place or to such other person, firms or
corporations as
Lessor from time to time may designate in a Notice, Rent, during
the Term, as follows:
(a)
Minimum Rent During the Initial Term .
The initial annual “ Minimum Rent ”
payable hereunder shall be One Million Eight Hundred Thousand and
No/100 Dollars ($1,800,000.00), payable in advance in equal monthly
installments of One Hundred Fifty Thousand and no/100 Dollars
($150,000.00), plus all increases in the Minimum Rent as provided
in Section 3.1(b) below, which shall be payable on
the first (1 st )
calendar day of each calendar month of the Term; provided, however,
that if the first (1 st )
calendar day is not a Business Day, Minimum Rent shall be payable
on the first (1 st )
Business Day which follows the first (1 st )
calendar day of the month. If necessary, Minimum Rent
shall be prorated for any partial month at the beginning or end of
the Term.
(b)
Escalation of Minimum Rent for Capital Allowance
. There shall be no adjustment to the Minimum Rent for
any advances of the Tranche One Capital Allowance (as defined in
Section 9.1.4 ). Any advances of the
Tranche Two Capital Allowance shall result in increases in the
Minimum Rent on the first day of each month immediately following
each advance by the amount disbursed multiplied by eight and
one-half percent (8.5%).“” Lessor and Lessee
hereby agree that the parties will enter into an amendment to this
Lease upon the earlier to occur of (i) the final funding of the
Tranche Two Capital Allowance, or (ii) the Renovation Deadline to
affirm the revised Minimum Rent if there are any disbursement of
the Tranche Two Capital Allowance.
(c)
Extended Terms . The Minimum Rent during the
Extended Terms shall be as stated in Article XXXIV
.
(d)
Annual Escalation of Minimum Rent . Commencing on
the one-year anniversary of the Commencement Date (if the
Commencement Date is the first (1 st )
day of a calendar month, or, if not, on the first (1
st ) day of the first (1 st )
full month following the Commencement Date), the Minimum Rent shall
increase to an annual amount of Two Million One Hundred Thousand
and No/100 Dollars ($2,100,000.00), payable in advance in equal
monthly installments of One Hundred Seventy Five Thousand and
no/100 Dollars ($175,000.00), plus all increases in the Minimum
Rent as provided in Section 3.1(b)
above. Commencing on the two-year anniversary of the
Commencement Date (if the Commencement Date is the first (1
st ) day of a calendar month, or, if not, on the
first (1 st
) day of the first (1
st ) full month following the Commencement Date),
the Minimum Rent shall increase to an annual amount of Two Million
Five Hundred Thousand and No/100 Dollars ($2,500,000.00), payable
in advance in equal monthly installments of Two Hundred Eight
Thousand Three Hundred Thirty Three and 33/100 Dollars
($208,333.33), plus all increases in the Minimum Rent as provided
in Section 3.1(b) above. A one time
payment in an amount equal to five percent (5%) of the Incremental
Gross Revenues shall be due and payable within forty five (45) days
after the end of the third Lease Year.
(e) Commencing
on the third-year anniversary of the Commencement Date (if the
Commencement Date is the first (1 st )
day of a calendar month, or, if not, on the first (1
st ) day of the first (1 st )
full month following the Commencement Date), and repeating on each
subsequent one-year anniversary thereof during the Term (including
any Extended Term) (each,
an “
Adjustment Date ”), the Minimum Rent, shall increase
by three percent (3%) over the Minimum Rent for the immediately
preceding year (which on the third-year anniversary, shall include
the one time payment identified above in Section
3.1(d)) .
(f) Each
month, payments of Minimum Rent shall be delivered to Lessor by
Lessee in a single payment by wire transfer.
Additional Charges
.
In addition to Minimum Rent, (1)
Lessee, subject to its rights under Article XII ,
will also pay and discharge as and when due and payable all other
amounts, liabilities, obligations and Impositions which Lessee
assumes or agrees to pay under this Lease, including but not
limited to those set forth in Articles IX and
XIII , below, and (2) in the event of any failure on
the part of Lessee to pay any of those items referred to in clause
(1) above, Lessee will also promptly pay and discharge every fine,
penalty, interest and cost which may be added for non-payment or
late payment of such items (the items referred to in clauses (1)
and (2) above being referred to herein collectively as the “
Additional Charges ”), and Lessor shall have all legal
equitable and contractual rights, powers and remedies provided
either in this Lease or by statute or otherwise in the case of
nonpayment of the Additional Charges. If any elements of
Additional Charges are not paid within seven (7) days after due
(after taking into account applicable time periods during which
Lessee may contest the Additional Charges under Article
XII ) and Lessor pays any such amount (which Lessor shall
have the right, but not the obligation to do), then, in addition to
Lessor’s other rights and remedies, Lessee will pay Lessor on
demand, as Additional Charges, interest on such unpaid Additional
Charges computed at the Overdue Rate from the due date of such
installment to the date of Lessee’s payment
thereof. To the extent that Lessee pays any Additional
Charges directly to Lessor (as opposed to the applicable third
party payee) pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges
to the entity to which they would otherwise be due, and within ten
(10) business days after its receipt, Lessor shall remit such
payment(s) to the entity to which such payment(s) is
due.
Net
Lease . Notwithstanding any provisions in this Lease to
the contrary (except with respect to Lessee’s rights set
forth in Article V ), Minimum Rent shall be paid
absolutely net to Lessor, so that this Lease shall yield to Lessor
the full amount of the installments of Minimum Rent throughout the
Term, all as more fully set forth in Articles IV, IX and
XIII , and other provisions of this Lease.
Non-Allocable Minimum Rent
.
Notwithstanding any language
contained in this Lease to the contrary, the parties agree and
acknowledge that the amount set forth as Minimum Rent is calculated
on the basis of leasing the Leased Property together as a single,
inseparable group and is non-allocable among the Leased Property.
Further notwithstanding any language contained in this Lease to the
contrary, the parties further agree and acknowledge that it would
be impossible to allocate to any Leased Property a divisible
portion of the Minimum Rent. Further notwithstanding any language
contained in this Lease to the contrary, Lessee agrees and
acknowledges that the leasing of the Leased Property as an
inseparable whole was accepted by Lessor as a special and essential
inducement to enter into this transaction, and but for
Lessee’s agreement to lease the Leased Property as an
inseparable whole, Lessor would not have entered into this
Lease.
Late
Charge . LESSEE HEREBY ACKNOWLEDGES THAT
LATE PAYMENT BY LESSEE TO LESSOR OF RENT (INCLUDING WITHOUT
LIMITATION MINIMUM RENT) WILL CAUSE LESSOR TO INCUR COSTS NOT
CONTEMPLATED BY THIS LEASE, THE EXACT AMOUNT OF WHICH WILL BE
EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS INCLUDE,
BUT ARE NOT LIMITED TO, PROCESSING AND ACCOUNTING
CHARGES. ACCORDINGLY, IF ANY INSTALLMENT OF RENT SHALL
NOT BE RECEIVED BY LESSOR WITHIN FIVE (5) DAYS AFTER SUCH AMOUNT
SHALL BE DUE, THEN WITHOUT ANY REQUIREMENT FOR NOTICE TO LESSEE,
LESSEE SHALL PAY TO LESSOR A LATE CHARGE EQUAL TO FIVE PERCENT (5%)
OF SUCH OVERDUE AMOUNT. THE PARTIES HEREBY AGREE THAT
SUCH LATE CHARGE REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE
COSTS LESSOR WILL INCUR BY REASON OF LATE PAYMENT BY
LESSEE. ACCEPTANCE OF SUCH LATE CHARGE BY LESSOR SHALL
IN NO EVENT CONSTITUTE A WAIVER OF LESSEE’S DEFAULT OR BREACH
WITH RESPECT TO ANY UNPAID OVERDUE AMOUNTS, NOR PREVENT LESSOR FROM
EXERCISING ANY OF THE OTHER RIGHTS AND REMEDIES GRANTED UNDER THIS
LEASE, AT LAW OR IN EQUITY. NOTWITHSTANDING THE
FOREGOING, HOWEVER, THE ABOVE-REFERENCED LATE CHARGE SHALL NOT BE
IMPOSED ON ADDITIONAL CHARGES SO LONG AS LESSEE IS CONTESTING SUCH
ADDITIONAL CHARGES IN ACCORDANCE WITH ARTICLE XII
BELOW.
INITIAL: Lessor
/s/ CM
Lessee_/s/
EM__
Default
Interest. Rent not paid on or before five (5) days after
the due date shall bear interest at the Overdue Rate from the due
date until paid, or if this rate is now or becomes at any time
unlawful in the State of California, then the maximum rate
permitted by law.
Security
Interest . Lessee hereby grants to Lessor a
lien and security interest on all of Lessee’s Personal
Property now or hereafter placed in or upon the Leased Property,
together with all income, rents, revenues, accounts receivable, and
other income of every kind and nature derived from the operation of
the Facilities, and all proceeds thereof, all of which shall be and
remain subject to such lien and security interest of Lessor for
payment of all Rent and other sums agreed to be paid by Lessee
herein and the performance of all of Lessee’s obligations
hereunder. Provided, however, Lessor shall not have a
lien which would be superior to a lien from a lending institution,
supplier or leasing company, if such lending institution, supplier
or leasing company has a security interest in the equipment,
furniture or other tangible personal property and which security
interest has its origin in a transaction whereby Lessee originally
acquired such equipment, furniture or other tangible personal
property; provided, however, that said liens secure, in the
aggregate, obligations of Lessee not in excess of One Thousand Five
Hundred and No/100 Dollars ($1,500.00) per month. The
provisions of this paragraph relating to such lien and security
interest shall constitute a security agreement under and subject to
the Uniform Commercial Code of the state(s) in which Lessee’s
Personal Property is located. The foregoing security
interest shall also apply to all accounts receivable and other
income, from whatever source, of or relating to Lessee’s
operation of the Leased Property in accordance with its Primary
Intended Use. Lessee shall, upon request, execute and
deliver to Lessor any additional instruments, documents,
agreements, etc. deemed by Lessor to be necessary or prudent in
order to perfect or otherwise evidence and provide notice of
the
foregoing
security interest, including, without limitation, a Security
Agreement in Lessor’s standard form, and a UCC-1 Financing
Statement.
(a) Subject
to this Section 4.1(a) and Section 4.1(b) and Article
XII relating to permitted contests, Lessee will pay, or
cause to be paid, all Impositions which relate to any period within
the Term, before any fine, penalty, interest or cost may be added
for non-payment (or earlier if required by any taxing authority),
such payments to be made directly to the taxing authorities where
feasible, and will promptly furnish to Lessor copies of official
receipts or other satisfactory proof evidencing such
payments. Lessee’s obligation to pay such
Impositions shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Leased Property or any part
thereof. If any Imposition may, at the option of the
taxpayer, lawfully (without penalty) be paid in installments
(whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may exercise the option to pay the same (and
any accrued interest on the unpaid balance of such Imposition) in
installments and in such event, shall pay such installments during
the Term hereof (subject to Lessee’s right of contest
pursuant to the provisions of Article XII ) as the
same become due and before any fine, penalty, premium, further
interest or cost may be added thereto. Lessee, at its
expense, shall, to the extent required or permitted by Legal
Requirements, prepare and file all tax returns and reports in
respect of any Imposition as may be required by governmental
authorities. Any refund due from any taxing authority in respect of
any Imposition shall be paid over to or retained by Lessee provided
no Event of Default then exists, but if an Event of Default has
occurred and is continuing, such refund shall be paid over to
Lessor, and Lessee hereby authorizes Lessor to accept any such
refunds directly, and hereby authorizes any such taxing authority
to pay such amounts directly to Lessor upon receipt of written
instructions to do so together with a statement by Lessor that an
Event of Default has occurred and is continuing. Any such funds
retained by Lessor due to an Event of Default shall be applied as
provided in Article XVI . Lessor and Lessee shall,
upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any
property covered by this Lease as personal property, Lessee shall
file personal property tax returns in such jurisdictions where
required. Lessor, to the extent it possesses the same, and Lessee,
to the extent it possesses the same, will provide the other party,
upon request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property.
Where Lessor is legally required to file personal property tax
returns, Lessee will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient
time for Lessee to file a protest. Lessee may, upon notice to
Lessor, at Lessee's option and at Lessee's sole cost and expense,
protest, appeal or institute such other proceedings as Lessee may
deem appropriate to effect a reduction of real estate or personal
property assessments and Lessor, at Lessee's expenses as aforesaid,
shall reasonably cooperate with Lessee in such protest, appeal, or
other action, provided that Lessee may not withhold payments
pending such challenges except under the conditions set forth in
Article XII . Billings for reimbursement
by Lessee to Lessor of personal property taxes shall be accompanied
by copies of a bill therefor and payments thereof which identify
the personal property with respect to which such payments are
made.
(b) Notwithstanding
anything to the contrary contained in
Section 4.1(a) , above, concurrent with the
payment of Minimum Rent, Lessee shall pay to Lessor monthly
deposits, as reasonably determined by Lessor, to cover real
property taxes for each Leased Property as and when they become
due. The deposits shall be held in escrow in a
non-interest-bearing account which may be commingled with other
funds of Lessor and disbursed annually or semi-annually, as the
case may be, in accordance with such instructions as may be set
forth in the tax bills. Upon receipt of tax bills
pertaining to each such Leased Property, Lessor shall furnish
Lessee with a copy of such bill. If the total amount
paid by Lessee for any taxable period under this Section
4.1(b) shall be less than the actual amount due from Lessee
for such period, Lessee shall pay to Lessor the difference within
ten (10) days following demand; and if the total amount paid by
Lessee for any tax period under this
Section 4.1(b) shall exceed the actual amount
due from Lessee for such period, such excess shall be credited
against the next monthly payment due from Lessee under this
Lease.
Notice of
Impositions . Upon its receipt of same, Lessor shall give
prompt Notice to Lessee for all Impositions payable by Lessee
hereunder of which Lessor obtains actual knowledge, but Lessor's
failure to give any such Notice shall in no way diminish Lessee's
obligations hereunder to pay such Impositions.
Adjustment of Impositions
.
Impositions imposed in respect of
the tax-fiscal periods during which the Term commences and
terminates shall be adjusted and prorated between Lessor and
Lessee, whether or not such Imposition is imposed before or after
such commencement or termination, and Lessee's obligation to pay
its prorated share thereof after termination shall survive such
termination.
Utility
Charges . Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, sewer connection and all
other utilities used in or for the Leased Property and all
operating expenses of every kind and nature during the
Term.
Insurance
Premiums . Lessee will pay or cause to be paid all premiums
for the insurance coverages required to be maintained pursuant to
Article XIII (or elsewhere in this Lease) during the
Term. During any portion of the Term of the Lease in
which Lessee is not in compliance with the provisions of
Article XIII , Lessee shall reimburse Lessor for the
costs of any premiums of insurance coverage obtained by Lessor or
maintained by Lessor in connection with the Leased Property within
ten (10) days of Lessor’s demand therefor. Lessee
shall not have the right to receive any proceeds or other benefits
from any such insurance obtained by Lessor on Lessee’s
behalf.
Inspection Fees . Lessee shall, in addition to all
other sums, pay all fees for inspection and examination of the
Leased Property during the Term hereof which are charged by any
Property Mortgagee or by any public authority having jurisdiction
thereof; provided, however, that Lessee shall not be required to
pay any such fees that exceed One Thousand Five Hundred and no/100
Dollars ($1,500.00) per Fiscal Year.
Property
Mortgage Offset . Should Lessor default under the terms of any
Property Mortgage, and, provided no Event of Default exists, Lessee
shall have the right to perform Lessor’s obligations under
any such Property Mortgage and offset the amounts expended
thereunder against the payment of Minimum Rent. No other offset
against the payment of Minimum Rent (or any other Rent) of any kind
is permitted.
Ownership
of the Leased Property . Lessee acknowledges and agrees that the Leased
Property is the property of Lessor or Lessor has a leasehold
interest in the Leased Property such that it is entitled to enter
into this Lease, and that Lessee has only the right to the
exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease. Lessee acknowledges and
agrees that this Lease does not grant an option or any other type
of right to purchase the Leased Property from Lessor.
Lessee's
Personal Property . Lessee may (and shall as provided hereinbelow),
at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of
Lessee's Personal Property, and Lessee may, subject to the
conditions set forth below, remove the same upon the expiration or
any prior termination of the Term. Lessee shall provide
and maintain during the Term all such Lessee's Personal Property as
shall be necessary in order to operate each Facility in compliance
with all Legal Requirements and Insurance
Requirements. All of Lessee's Personal Property not
removed by Lessee within thirty (30) days following the expiration
or earlier termination of this Lease shall be considered abandoned
by Lessee and may be used, appropriated, sold, destroyed or
otherwise disposed of by Lessor without first giving notice thereof
to Lessee and without any payment to Lessee and without any
obligation to account therefor. Lessee shall, at its
expense, restore the Leased Property to the condition required by
Section 9.1 , including repair of all damage to the
Leased Property caused by the removal of Lessee's Personal
Property, whether effected by Lessee or Lessor.
Condition
of Leased Property . LESSEE REPRESENTS THAT IT IS A KNOWLEDGEABLE,
EXPERIENCED AND SOPHISTICATED LESSEE AND/OR PURCHASER OF REAL
ESTATE, AND THAT LESSEE HAS RELIED AND SHALL RELY SOLELY ON (I) ITS
OWN EXPERTISE AND THAT OF LESSEE’S CONSULTANTS IN LEASING THE
LEASED PROPERTY, AND (II) LESSEE’S OWN KNOWLEDGE OF THE
LEASED PROPERTY BASED ON ITS INVESTIGATIONS AND INSPECTIONS OF THE
LEASED PROPERTY. LESSEE HAS CONDUCTED SUCH INSPECTIONS
AND INVESTIGATIONS OF THE LEASED PROPERTY AS LESSEE DEEMED OR SHALL
DEEM NECESSARY, INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL
ENVIRONMENTAL AND FINANCIAL CONDITIONS THEREOF, AND SHALL RELY UPON
SAME. LESSEE SHALL ASSUME THE RISK THAT ADVERSE MATTERS,
INCLUDING, BUT NOT LIMITED TO, ADVERSE PHYSICAL AND/OR FINANCIAL
CONDITIONS, MAY NOT HAVE BEEN REVEALED BY LESSEE’S
INSPECTIONS AND
INVESTIGATION;
PROVIDED, HOWEVER, THAT LESSEE ASSUMES NO LIABILITY FOR RELEASES OF
HAZARDOUS MATERIALS THAT OCCURRED PRIOR TO THE COMMENCEMENT DATE OR
FOR OTHER HAZARDOUS ENVIRONMENTAL CONDITIONS EXISTING AT THE LEASED
PROPERTY ON THE COMMENCEMENT DATE. LESSEE ACKNOWLEDGES
AND AGREES THAT UPON EXECUTION OF THIS LEASE, LESSOR SHALL LEASE
AND CONVEY TO LESSEE AND LESSEE SHALL ACCEPT THE LEASED PROPERTY
“AS IS, WHERE IS,” WITH ALL FAULTS AND DEFECTS (LATENT
AND APPARENT). LESSEE FURTHER ACKNOWLEDGES AND AGREES
THAT THERE ARE NO ORAL AGREEMENTS, PURCHASE CONTRACTS, WARRANTIES
OR REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE LEASED PROPERTY
MADE BY LESSOR, ANY AGENT, REPRESENTATIVE, EMPLOYEE, BROKER, OR
CONTRACTOR OF LESSOR OR ANY THIRD PARTY. THE TERMS AND
CONDITIONS OF THIS SECTION OF THIS LEASE SHALL EXPRESSLY SURVIVE
THE EXECUTION OF THIS LEASE, AND SHALL NOT MERGE WITH THE
PROVISIONS OF ANY LEASE. LESSOR IS NOT LIABLE OR BOUND
IN ANY MANNER BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS,
OR INFORMATION PERTAINING TO THE LEASED PROPERTY FURNISHED BY
LESSOR, ANY REAL ESTATE BROKER, CONTRACTOR, MEMBER, AGENT, EMPLOYEE
OR OTHER PERSON. LESSEE COVENANTS AND ACKNOWLEDGES THAT
THE LEASE AND THE RENT PAYABLE HEREUNDER REFLECTS THE “AS
IS” NATURE OF THIS TRANSACTION AND ANY FAULTS, LIABILITIES,
DEFECTS OR OTHER ADVERSE MATTERS THAT MAY BE ASSOCIATED WITH THE
LEASED PROPERTY. LESSEE HAS FULLY REVIEWED THE
DISCLAIMERS AND WAIVERS SET FORTH IN THIS LEASE WITH ITS COUNSEL
AND UNDERSTANDS THE SIGNIFICANCE AND EFFECT THEREOF.
To the extent permitted by law, Lessor hereby
assigns to Lessee, all of Lessor's rights to proceed against any
predecessor in title (but not against Lessor) for breaches of
warranties or representations, or for latent defects in the Leased
Property. Lessor shall reasonably cooperate with Lessee in the
prosecution of any such claim, in Lessor's or Lessee's name, all at
Lessee's sole cost and expense; provided, however, that all
compensatory damages shall be used by Lessee for repair or
replacement of the items for which compensation was
granted.
Use of
the Leased Property .
Lessee covenants that it will
proceed with due diligence to maintain all permits, licenses and
approvals needed to use and operate the Leased Property and each
Facility in accordance with Legal Requirements.
During the Term, Lessee shall use or
cause to be used the Leased Property as assisted living or
residential care facilities with not less than the applicable
number of licensed beds and units shown on
Schedule “7.2.2” attached hereto and
incorporated with respect to each Leased Property (the “
Required Bed/Unit Count ”), and for such other uses as
may be necessary or incidental to such use (the particular such use
to which the Leased Property is put is herein referred to as the
“ Primary Intended Use ”). Lessee
shall not use the Leased Property or any portion thereof for any
use other than the Primary Intended Use without the prior written
consent of Lessor, which consent may be withheld in Lessor’s
sole and absolute
discretion. No
use shall be made of the Leased Property, and no acts shall be
done, which will cause the cancellation of any insurance policy
covering the Leased Property or any part thereof, nor shall Lessee
sell or otherwise provide to residents or patients therein, or
permit to be kept, used or sold in or about the Leased Property any
article which may be prohibited by Insurance Requirements or Legal
Requirements. Lessee shall, at its sole cost, comply with all
Insurance Requirements and Legal Requirements.
Lessee covenants and agrees that
during the Term it will operate continuously the Leased Property in
accordance with its Primary Intended Use and will maintain its
licensure, with the Required Bed/Unit Count, and
certifications.
Lessee shall comply in all material
respects with all licensing and other laws and all covenants,
conditions and restrictions affecting the Leased Property
(sometimes hereinafter referred to as
“CC&R’s”) and other use or maintenance
requirements applicable to the Primary Intended Use provided the
terms and conditions of such CC&Rs are consistent with the
requirements imposed on Lessee under this Lease, including, but not
limited to the requirement to use the Leased Property for its
Primary Intended Use. Further, Lessee shall not commit
any act or omission that would in any way violate any certificate
of occupancy affecting any Facility, result in closure of any
Facility or result in the sale or transfer of all or any portion of
any related certificate of need, bed rights or other similar
certificate or license. During the Term, all inspection
fees, costs and charges associated with a change of such licensure
or certification (“ Change of Licensure Costs ”)
shall be borne solely by Lessee. Notwithstanding the
foregoing, Lessee shall not be responsible for any Change of
Licensure Costs that would be ordinarily incurred by a new operator
of a facility under usual custom and practice in the applicable
business (e.g., application fees for licensure, costs of training
personnel, legal costs in connection with the same) and Lessee
shall not be required to effect any repairs to or
modification or alterations of the Facility as maybe necessary for
a prospective new operator to obtain such licenses as may be
required to operate the Facilities. In all events,
Lessee shall cooperate in good faith, at no out-of-pocket expense
to itself, with the efforts of any prospective new operator of any
Facility to obtain licensure.
Lessee shall not commit or suffer to
be committed any waste on the Leased Property, or in any Facility,
nor shall Lessee cause or permit any nuisance thereon. Lessor
acknowledges that Lessee’s operation of the Facilities in
accordance with the Primary Intended Use will not constitute waste
or nuisance.
Lessee shall neither suffer nor
permit the Leased Property or any portion thereof, including
Lessee's Personal Property, to be used in such a manner as it might
reasonably tend to impair Lessor's (or Lessee's, as the case may
be) title thereto or to any portion thereof, or may reasonably make
possible a claim or claims of adverse usage or adverse possession
by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
Transfer
of Residents . Lessee acknowledges that a fair
return to Lessor on and protection of its investment in the Leased
Property is dependent, in part, on Lessee’s dedication to the
business and the concentration on the Leased Property during the
Term of the business of Lessee and its Affiliates in the
geographical area of such Facility. Lessee
further
acknowledges
that the diversion of residents or patient care activities from any
Facility to other facilities owned or operated, directly or
indirectly, by Lessee or its Affiliates, or any other party, except
as may be medically necessary, at any time during the Term will
have a material adverse affect on the value and utility of such
Facility. Therefore, Lessee covenants that during the
Term, and for a period of one (1) year thereafter, Lessee shall not
recommend or solicit the removal or transfer of any resident or
patient from either Facility to any other facility or institute;
except as may be required for medically appropriate
reasons.
Bed
Rights . Lessee acknowledges and agrees that
the rights to operate the beds located at the Leased Property for
its Primary Intended Use under the laws of the State of California
(i) affect the value of the Leased Property, and (ii) the grant of
this Lease is conditioned upon the existence of such
rights. Lessee shall not relocate any licensed bed to
any other location and shall not transfer any bed operating rights
to any other party.
Lessor to
Grant Easements, etc . Lessor will, from time to time so long as no
Event of Default exists, at the request of Lessee and at Lessee's
sole cost and expense (but subject to Lessor’s approval), (i)
grant easements and other rights in the nature of easements with
respect to the Leased Property to third parties, (ii) release
existing easements or other rights in the nature of easements which
are for the benefit of the Leased Property, (iii) dedicate or
transfer unimproved portions of the Leased Property for road,
highway or other public purposes, (iv) execute petitions to
have the Leased Property annexed to any municipal corporation or
utility district, (v) execute amendments to any covenants and
restrictions affecting the Leased Property and (vi) execute and
deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications, transfers, petitions and
amendments (to the extent of its interests in the Leased Property),
but only upon delivery to Lessor of a signed affidavit by an
executive officer or equivalent person of authority at Lessee
stating that such grant, release, dedication, transfer, petition or
amendment is (a) reasonably required for the continued operation of
the Leased Property in accordance with the Primary Intended Use,
(b) not detrimental to the proper conduct of the business of Lessee
on the Leased Property and (c) does not reduce the value of the
Leased Property. Lessor shall not take any of the
foregoing actions without Lessee’s approval.
Compliance with Legal and Insurance
Requirements, Instruments, etc . Subject to Article XII relating to
permitted contests, Lessee, at its expense, will, during the Term,
(a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair
and restoration of the Leased Property, whether or not compliance
therewith requires structural changes in any of the Leased
Improvements or interferes with the use and enjoyment of the Leased
Property and (b) procure, maintain and comply with all licenses,
certificates of need, provider agreements and other authorizations
required for any use of the Leased Property and/or Lessee's
Personal Property then being made, and for the proper erection,
installation, operation and maintenance of the Leased Property or
any part thereof.
Legal
Requirements Covenants . Lessee shall acquire and maintain all licenses,
certificates, permits, provider agreements and other authorizations
and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use. Lessee further
covenants and agrees to perform all maintenance and alterations
necessary to operate the
Leased Property
in accordance with all Legal Requirements and Insurance
Requirements. Lessee, may, however, upon prior written notice to
Lessor, contest the legality or applicability of any such law,
ordinance, rule or regulation, or any licensure or certification
decision if Lessee maintains such action in good faith, with due
diligence, without prejudice to Lessee’s rights hereunder,
and at Lessee's sole cost and expense. If by the terms of any such
law, ordinance, rule or regulation, compliance therewith pending
the prosecution of any such proceeding may legally be delayed
without the occurrence of any fine, charge or liability of any kind
against the Leased Property or Lessee's leasehold interest therein
and without subjecting Lessee or Lessor to any liability, civil or
criminal, for failure to comply therewith, Lessee may delay
compliance therewith until the final determination of such
proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on
the prior written consent of Lessor, may nonetheless contest as
aforesaid and delay as aforesaid provided that such delay would not
subject Lessor to criminal liability and Lessee both (a) furnishes
to Lessor security satisfactory to Lessor (in its sole and absolute
discretion) against any loss or injury by reason of such contest or
delay, and (b) prosecutes the contest with due diligence and in
good faith.
Lessee, at its sole expense, will,
during the Term, keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto and which are under
Lessee's control (and Lessee's Personal Property) in good order and
repair (whether or not the need for such repairs occurs as a result
of Lessee's use, any prior use, the elements or the age of the
Leased Property, or any portion thereof), and, except as provided
in Article XIV , with reasonable promptness, make all
necessary and appropriate repairs thereto of every kind and nature,
whether interior or exterior, structural or non-structural,
ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to or during the Term,
provided, however, that Lessee shall be permitted to prosecute
claims against Lessee's predecessors (but not Lessor) in title for
(i) breach of any representation or warranty, or (ii) any
latent defects in the Leased Property. All repairs shall be at
least equivalent in quality to the original work. Lessee
will not take or omit to take any action the taking or omission of
which would reasonably be expected to materially or adversely
impair the value or the usefulness of the Leased Property or any
part thereof for its Primary Intended Use. Any repair
work performed by Lessee shall be paid for so that no lien (i.e.,
mechanics’, materialmen’s or other liens) shall attach
to the Leased Property, subject to the provisions of Article
XI . Notwithstanding anything to the contrary
contained in this Section 9.1.1 , commencing on the
third (3 rd
) anniversary of the Commencement
Date, Lessee shall at a minimum spend not less than an average of
$400.00 per unit per year over a trailing twenty-four (24) month
period at each Leased Property for such repairs and
maintenance. Lessee will furnish to Lessor a written
certificate from a duly authorized officer of Lessee within
forty-five (45) days after the close of each Fiscal Year of the
Lessee certifying that Lessee is in compliance with this
Section 9.1.1 . Each such Officer’s
Certificate shall be accompanied by an itemized statement of the
repairs and maintenance performed in the prior Fiscal Year at the
Leased Property in compliance with this Section 9.1.1
.
Lessor shall not under any
circumstances be required to build or rebuild any improvements on
the Leased Property, or to make any repairs,
replacements,
alterations,
restorations or renewals of any nature or description to the Leased
Property, whether ordinary or extraordinary, structural or
non-structural, foreseen/unforeseen, in connection with this Lease,
or to maintain the Leased Property in any way. Lessee hereby
waives, to the extent permitted by law, the right to make repairs
at the expense of Lessor pursuant to any law in effect at the time
of the execution of this Lease or hereafter enacted. Lessor shall
have the right to give, record and post, as appropriate, notices of
non-responsibility (or similar notices) under any mechanics' lien
laws now or hereafter existing.
Lessee shall not make any
modifications, alterations or improvements to the Leased
Improvements or any portion thereof, whether by addition or
deletion, without Lessor’s prior written consent, which
consent may be given or withheld in Lessor’s reasonable
discretion; provided, however, that Lessor’s consent shall
not be required in connection with any non-structural
modifications, alterations or improvements that do not constitute
capital improvements and that are otherwise made in compliance with
this Lease, so long as the total cost thereof, with respect to any
single Leased Property, does not exceed $50,000.00 and the total
cost with respect to any single Leased Property in any twelve (12)
month period does not exceed $100,000.00. Nothing
contained in this Lease and no action or inaction by Lessor shall
be construed as constituting the consent or request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for
the construction, alteration, addition, repair or demolition of or
to the Leased Property or any part thereof, or (ii) giving Lessee
any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the
making of any claim against Lessor in respect thereof or to make
any agreement that may create, or in any way be the basis for any
right, title, interest, lien, claim or other encumbrance upon the
estate of Lessor in the Leased Property, or any portion thereof.
Lessor shall have the right to give, record and post, as
appropriate, notices of nonresponsibility (or similar notices)
under any mechanics' lien laws now or hereafter
existing.
Lessee will, upon the expiration or
prior termination of the Term, vacate and surrender the Leased
Property to Lessor in the condition in which the Leased Property
was originally received from Lessor, except as repaired, rebuilt,
restored, altered or added to as permitted or required by the
provisions of this Lease, and except for ordinary wear and tear
(subject to the obligation of Lessee to maintain the Leased
Property in good order and repair during the
Term). Notwithstanding the foregoing, in the event
Lessee is specifically required by Lessor in writing to expend more
than One Hundred Sixty Thousand and no/100 Dollars ($160,000) on
capital expenditures to the Leased Property during the last two
Lease Years (which written requirement from Lessor shall, for
purposes of this Section 9.1.4, include the amounts which Lessee is
required to expend under Section 9.1.1 ), then the
unamortized portion of such capital expenditures (calculated using
a ten (10) year amortization period) shall be reimbursed to Lessee
at the expiration of the Term.
Expenditures to Comply with Law
. Without limiting Lessee's obligations as set
forth elsewhere in this Lease, during the Term, Lessee will, at its
sole cost and expense, make whatever expenditures (including but
not limited to capital and non-capital expenditures) that are
required to conform the Leased Property to such standards as may
from time to time be required by Legal Requirements, or capital
improvements required by any governmental agency
having
jurisdiction over the Leased Property as a condition of the
continued operation of the Leased Property for its Primary Intended
Use, pursuant to present or future Legal
Requirements.
Encroachments, Restrictions
.
If any of the Leased Improvements
shall, at any time during the Term, encroach upon any property,
street or right-of-way adjacent to the Leased Property, or shall
violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the rights of others
under any easement or right-of-way to which the Leased Property is
subject, then promptly upon the request of Lessor or at the behest
of any person affected by any such encroachment, violation or
impairment, Lessee shall, at its sole cost and expense, (and after
Lessor’s prior approval), subject to Lessee’s right to
sue Lessor’s predecessor in title (but not Lessor) with
respect thereto, contest the existence of any such encroachment,
violation or impairment; provided, however, that Lessee shall
assume no liability for any encroachments that exist at the Leased
Property on the Commencement Date. In the event of an
adverse final determination, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment,
whether the same shall affect Lessor or the Leased Property or (ii)
make such changes in the Leased Improvements, and take such other
actions, as Lessee in the good faith exercise of its judgment deems
reasonably practicable and necessary, to remove such encroachment,
and to end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to
continue the operation of the Leased Improvements for the Primary
Intended Use substantially in the manner and to the extent the
Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Any such
alteration shall be made in conformity with the applicable
requirements of Article IX . Lessee's
obligations under this Section 9.3 shall be in
addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other
insurance.
Renovation
. Lessor has agreed to
provide Lessee with a capital improvement allowance in an amount
not to exceed One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00) (the “ Capital Allowance ”)
which may be allocated by Lessee between the Facilities to renovate
the existing Leased Improvements (the “ Renovation
Project ”) and which shall be allocated into two tranches
of Seven Hundred Fifty Thousand and no/ 100 Dollars ($750,000) the
first of which tranche shall hereinafter be referred to as the
“ Tranche One Capital Allowance ” and the second
of which tranche shall hereinafter be referred to as the “
Tranche Two Capital Allowance. ” Any
proposed use by Lessee of the Capital Allowance shall be subject to
the review and prior written approval of Lessor, which approval
shall not be unreasonably withheld after receipt of the
Consultant’s Approval (defined below) (“
Lessor’s Approval ”); provided, however, that
such use of the Capital Allowance must meet the capitalization
requirements according to U.S. generally accepted accounting
principals (“ GAAP ”) and accordingly Lessor
will notify Lessee in the Lessor’s Approval of its
determination whether the proposed Renovation Project completed in
compliance with the Consultant’s Approval can be capitalized
in accordance with GAAP. In the event Lessor determines that it
will be unable to capitalize any proposed Renovation Project it
shall so advise Lessee by written notice setting forth in
reasonable detail the facts upon which its determination
is based and it
shall give Lessee a reasonable opportunity to modify the proposed
Renovation Project in order to address the accounting issues
identified by Lessor. Any amount of the Capital
Allowance advanced for any Renovation Project at a Leased Property
will increase Lessor’s Investment in the respective Leased
Property. Lessee shall have twenty-four (24) months from
the Commencement Date (the “ Renovation Deadline
”) to complete the Renovation Project. The Capital
Allowance will be available to Lessee until the Renovation
Deadline, at which time Lessor’s obligation to fund any
unused portion of the Capital Allowance will expire.
Lessor’s
Consultant . Lessee shall provide Dennis
Mitchell of Mitchell & Associates, or such other consultant as
may be identified by Lessor from time to time, (“
Lessor’s Consultant ”) with a copy of any plans
and specifications for the Renovation Project for review and
approval prior to the commencement of work, which approval shall
not be unreasonably withheld or delayed. If Lessor’s
Consultant objects, in whole or in part, to the proposed plans and
specifications, he shall so advise Lessee and Lessor in writing,
setting forth in reasonable detail the basis of his objections, and
Lessee shall be given a reasonable opportunity to work with
Lessor’s Consultant to address any objections to the proposed
plans and specifications raised by Lessor’s Consultant with
the goal of the parties being to secure the approval of
Lessor’s Consultant of plans and specifications which are
acceptable to Lessee, Lessor and to Lessor’s Consultant. Once
Lessor’s Consultant is satisfied with the plans and bids for
improvements, Lessor’s Consultant shall provide written
approval (not to be unreasonably withheld or delayed) to Lessor of
the plans and specifications and Lessee shall be authorized to
commence work (the “ Consultant’s Approval
”). Lessee shall be solely responsible for the
costs of Lessor’s Consultant, which costs shall be funded by
Lessor from, and as part of, the Capital Allowance. In
addition, Lessor’s Consultant shall be granted full access to
the Leased Property for the sole purpose of periodically inspecting
and monitoring the work comprising the Renovation
Projects. The reasonable costs of such inspections and
monitoring are to be borne by Lessee, and shall be funded by Lessor
from, and as part of, the Capital Allowance. The fees and expenses
of Lessor’s Consultant shall not exceed Twenty Thousand and
no/100 Dollars ($20,000); provided, however, the foregoing limit
shall not apply to any Renovation Project which is not completed
materially in accordance with the Consultant’s
Approval.
Disbursements of Capital
Allowance . Provided no Event of Default has
occurred and/or is continuing, and no condition exists which with
the passage of time or the giving of notice (or both) would
constitute an Event of Default, in response to a written
disbursement request in substantially the form attached as
Exhibit “C” (each a “ Request
for Advance ”), Lessor shall make advances of the Capital
Allowance on the last day of each calendar month prior to the
Renovation Deadline, provided that, if the last day of the month is
not a business day, then the advance shall be disbursed on the next
succeeding business day (each a “ Disbursement Date
”), following the satisfaction, in Lessor’s sole and
absolute discretion, of each of the following
conditions:
(a) If the Request for
Advance relates to the purchase of furniture, fixtures or
equipment, Lessor shall disburse to Lessee such portions of the
Capital Allowance as are necessary to reimburse Lessee the amount
of the paid invoice; and
(b) If the Request for
Advance relates to an alteration to the Leased Property:
(i) Lessee shall
submit a completed Request for Advance, no later than the fifteenth
(15 th
) calendar day of any calendar
month;
(ii) Lessee shall have
delivered to Lessor all original mechanics' lien waivers, in form
and substance satisfactory to Lessor, reasonably deemed necessary
by Lessor for services and materials provided in connection with
the Renovation Project;
(iii) All costs for the
Renovation Project are to be certified by Lessee in accordance with
the Request for Advance. Verification of the monthly
progress of the Renovation Project and the costs incurred may be
made by Lessor in its reasonable judgment;
(iv) Lessee shall be
deemed to have remade, as of the date of each advance, each and
every representation and warranty made by Lessee in this Lease, and
each such representation and warranty shall be true and correct at
the time of each advance;
(v) Lessee shall have
provided Lessor with evidence reasonably satisfactory to Lessor
that the construction work complies with all building, zoning and
other laws and governmental codes, rules and regulations, all
necessary licenses, permits, approvals and consents required for
the use, occupancy and operation of the Facility as altered by the
Renovation Project, and evidence satisfactory to Lessor that all
construction work completed as of the date of the final Request for
Advance, to the extent required by applicable laws and regulations,
has been inspected and approved by each governmental authority with
jurisdiction over the Renovation Project and by each person or
entity that has the right to inspect and approve the construction
work, and each applicable governmental authority shall have issued
the appropriate permit, license or certificate to evidence such
approval;
(vi) Before processing
the final Request for Advance, Lessor shall have received a
completion certificate, in substantially the form attached hereto
as Exhibit “F” , executed by Lessee and
Lessor’s Consultant stating that the Renovation Project has
been completed, together with such other evidence that no mechanics
or materialmen's liens or other encumbrances have been filed and
remain in effect against the Leased Property, or appropriate lien
waivers from any contractor or subcontractor;
(vii) To the extent an
architect has been engaged, a signed copy of the “AIA
Document G702 Application and Certificate for Payment” shall
have been submitted to Lessor with each Request for Advance;
and
(viii) Before processing
the final Request for Advance, Lessee shall have provided Lessor
with the Certificate of Occupancy, if necessary, or such other
evidence of satisfactory completion and approval of the subject
renovation work issued by the appropriate local governmental
authority.
Lessee's
Obligations for Hazardous Materials . Lessee shall, at its sole cost and expense, take
all actions as required to cause the Leased Property including, but
not
limited to, the
Land and all Leased Improvements, to be free and clear of the
presence of all Hazardous Materials (defined below) during the
Term; provided, however, that Lessee shall be entitled to use and
maintain de minimus amounts of Hazardous Materials on the Leased
Property in connection with Lessee's business and in compliance
with all applicable laws. Lessee shall, upon its discovery, belief
or suspicion of the presence of Hazardous Materials on, in or under
any part of the Leased Property, including, but not limited to,
t
|
